Freight indicators suggest the worst is in trucking’s rearview mirror

TORONTO, Ont. – The worst of trucking conditions wrought by the Covid-19 pandemic may be in the rearview mirror, but the recovery could be choppy.

In its most recent Commercial Vehicle Dealer Digest, ACT Research predicts the economy will transition from contraction to growth over the third and fourth quarters, as the focus shifts from saving lives, to saving livelihoods.

“Clearly the global economy does not have the luxury of waiting a year or two for a vaccine to be developed before the current solution itself becomes the greater risk,” said Kenny Vieth, ACT’s president and senior analyst. However, the economy won’t rebound to pre-Covid levels overnight.

“Our forecast anticipates that the U.S. economy, as defined by GDP, will not return to its Q4 2019 size until after 2021,” Vieth added.

“In the supply chains that support complex OEM-level assembly operations, from raw materials to finished goods, it is not just about opening one plant, but opening thousands of plants simultaneously, making tens of thousands of parts that go into those assemblies in an orchestrated fashion, all with new layers of safety and testing protocols in place. It is one thing for the automotive/commercial/off-road industries to get supply chains up and running, it is another entirely to get buyers to market when the economy has so recently cratered and going outside poses an existential risk.”

Supply chains strained

A case in point is Ford, which quickly halted production at its Kansas City Ford Transit assembly plant after a worker tested positive for Covid-19. This after a Chicago plant was similarly shut down suddenly after production resumed there.

David Leggett, automotive analyst for data and analytics firm GlobalData, said “Vehicle makers across the world are facing similar issues as they restart manufacturing facilities that were shuttered during Covid-19 lockdowns. One obvious problem is that even while first wave of Covid-19 infection peaks have been passed, the Covid-19 pandemic is far from over and fresh outbreaks can disrupt activity.

“Moreover, disruptions can occur anywhere in the already stressed and elongated automotive manufacturing supply chain. The supply chain is ultimately only as strong as its weakest link and any disruptions to manufacturing companies along the supply chain anywhere in the world will impact others. On top of all that, demand for final products remains far below normal levels with an uncertain recovery trajectory.”

GlobalData anticipates the hit to the global automotive market this year will be greater than during the 2008-2008 financial crisis.

(Graph: FTR and Truckstop.com)

Freight market in recovery mode

Industry analyst FTR reports the truck freight recovery is well into the “restart phase” but overally volumes are still well below normal levels. “The trucking market is moving up in a slow, stair-step manner,” FTR reported.

But the worst should be behind us. FTR’s Truck Freight Recovery Index, as of May 25, was at 68.7, well above the bottoming of 28.9 on April 17. Dry van loads have returned to a “normal” reading of 86.3 – up from the bottom of 42.6 on April 24. “That doesn’t mean volumes are robust, they are still below last year’s levels,” FTR reported.

Temperature controlled loads, after bottoming at 39.9 on April 16, have recovered to an 88.1 reading, while flatbed remained stalled at 55.3, up from a bottom of 20.7 on April 17.

(Graph: FTR and Trucktsop.com)

Spot market picture brightens

The week ending May 22, week 20 of the year, recorded the fifth straight week of increasing spot market volumes, according to FTR and Truckstop.com. Weekly growth ranged from 10% to 20%, with week 20 volumes up 10.1% over the previous week.

More encouraging, rates saw their largest increase in four weeks since a major drop in April. Dry van and flatbed rates were up about 9-10 cents per mile, while reefer rates rose 12 cents.

Still, dry van rates remained nearly 25 cents per mile below their five-year average and volumes were about 82% of the five-year average for week 20, and about 92% of the volume seen the same period in 2019.

Avery Vise, FTR’s vice-president of trucking, said during a weekly Trucking Market Update podcast May 22, that “We are seeing an uneven recovery, where freight volumes are recovering in a series of plateaus.”

In Canada, TransCore Link Logistics saw overall load volumes on its Loadlink board plummet 56% in April, but it believes the market has bottomed, representing “absolute bottom levels of freight during this period of decline.”

A newly launched Commercial Mobility Recovery Dashboard, produced by Webfleet Solutions and Geotab, showed commercial transport activity is recovering. It draws on data from more than 3 million connected vehicles around the world.

The dashboard indicates North American commercial vehicle activity dropped 20% at its lowest point since the Covid-19 pandemic, but has recovered to 90% of pre-Covid levels. Commercial vehicle activity rose 2.2% between May 11-20, excluding weekends and holidays. Since the beginning of May, fleet activity within the construction and freight transportation industries was operating at or above the pre-pandemic baseline in Canada, the companies revealed.

(Photo: Geotab and Webfleet Solutions)

The dashboard can be found here.

Millennials to the rescue?

ACT Research said there’s a case to be made for a strong economic recovery, due to the structurally sound underlying pre-Covid economy and strong government stimulus.

“We believe that the maturing millennials will be the key to pushing the economy forward as they resume their transition to marriage, kids, and mortgages,” said Vieth.

He said he remains cautiously optimistic that there’s an end in sight to the economic damage incurred due to the pandemic.

“Our best guess is that the third quarter of this year will mark a transition, with a gradual and slow recovery commencing late in that quarter or in the fourth, followed by a pickup in momentum into 2021,” Vieth said.

James Menzies

James Menzies is editor of Today's Trucking. He has been covering the Canadian trucking industry for more than 18 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.

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  • The problem is not the drop in freight. The problem is no minimum freight rates and the high cost of insurance and plates on trucks that are not making any money. The whole trucking system needs to be looked at along with treatment and pay of truck drivers and the Federal Government needs to set up commercial insurance programs to bring in new truck and bus drivers and assistance with insurance costs.